Primeserv Group Limited is an investment holding company focusing on the delivery of human resources (HR) products, services and
solutions through its operating pillar, Primeserv HR Services. This incorporates two main areas of specialisation: Human Capital
Development operating as Primeserv HR Solutions; and Human Capital Outsourcing operating as Primeserv Outsourcing.
Events after the reporting date
Management is not aware of any material events which have occurred subsequent to the end of September 2013.
Basis of preparation
These divisions provide a comprehensive HR value chain that can be applied through Primeserv’s IntHRgrate™ Model in its entirety or
in modular form. These divisions encompass an extensive range of HR consulting solutions and services, corporate and vocational
training programmes, technical skills training centres, as well as resourcing and flexible staffing services, supported by wage bureaus and
HR logistics outsourcing operations.
The results for the Group for the six months ended 30 September 2013 have been prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards (“IFRS”), the presentation and disclosure requirements of IAS 34
(as revised): Interim Financial Reporting, the Companies Act of 2008, the JSE Listings Requirements and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee. Except as recorded below, the accounting policies are consistent with those
described and applied in the annual financial statements for the year ended 31 March 2013. The results were prepared by the Group
Financial Director, Mr R Sack CA (SA). The results have not been reviewed or audited by the Group’s external auditors.
Adoption of new standard – IFRS 10: Consolidated financial statements
The national economy remains vulnerable to both internal and external factors with the growth rate remaining sluggish and unemployment
at very high levels.
Overview of results
As a consequence of the adoption of IFRS10: Consolidated Financial Statements, the results of Bathusi Staffing Services Proprietary
Limited (“Bathusi”), previously accounted for as an associate company, have now been incorporated into the financial statements as a
subsidiary company. The commentary presented below deals with Bathusi in terms of the new standard.
The results for the six-month period under review show a return to overall profitability from the prior year loss of R4,3 million.
Total revenue for the six months has decreased by 10% from R359,8 million to R322,9 million primarily due to the reduction in revenue
attributable to the discontinued operation. Revenue attributable to continuing operations decreased by 6% from R341,1 million to R321,5
million. The gross profit from continuing operations has increased by 10% from R46,9 million to R51,4 million with the overall gross profit
percentage from continuing operations increasing from 13,7% to 16,0%. This improvement is a consequence of improved trading with
higher margin clients and the reduction in volume of some lower margin business which had benefited the revenue line whilst delivering
less than optimal returns.
EBITDA has increased by 11% from R6,9 million to R7,7 million with EBITDA from continuing operations improving by 37% from R7,1
million to R9,7 million. The EBITDA loss pertaining to the discontinued Colleges unit has increased over that of the comparable six-month
period from a loss of R0,1 million to a loss of R2,0 million. The loss of R2,0 million relating to the final month of trading and discontinuance
of the business must be seen in the context of the prior year loss of R9,0 million for the full financial year. The overall operating profit has
increased by 18% from R5,5 million to R6,5 million with that from continuing operations improving by 42% from R6,0 million to R8,5
million. The net interest cost has reduced from a net cost of R2,7 million to a net cost of R2,5 million. Profit before tax has increased by
46% from R2,7 million to R4,0 million. Profit before tax from continuing operations has increased by 52% from R3,9 million to R6,0 million.
Total comprehensive income attributable to shareholders of the Company has decreased from R4,3 million to R3,7 million. Earnings per
share and headline earnings per share have decreased by 16% from 4,63 cents per share to 3,90 cents per share with earnings per share
and headline earnings per share from continuing operations increasing by 9% from 5,56 cents per share to 6,04 cents per share.
Trade receivables have decreased from R113,9 million at the end of September 2012 to R100,8 million at the end of September 2013.
The average days sales outstanding (“DSO”) has improved from 55 days to 52 days for the period under review. Trade payables have
decreased by R10,6 million from R44,6 million to R34,0 million. Cash flow from operations improved by R1,2 million from R4,0 million to
R5,2 million, while cash invested in working capital improved from an outflow of R10,3 million for the comparable period to an outflow of
R4,9 million in the current review period. Cash and cash equivalents turned around from an outflow of R7,4 million for the 6 months ended
September 2012, to cash generated of R0,9 million for the current period.
Human Capital Outsourcing
Trading in the division was positive albeit that revenue decreased by 6% from R326,9 million to R306,0 million as a consequence of a
change in client mix and the impact of industrial action in the motor industry over the course of August and September. Operating profit
for the segment showed an improvement over the prior period. The DSO has improved from 54 days at the end of September 2012, to
49 days at the end of the current reporting period. Gross profit and profitability improved with certain low margin business reducing and
being substituted with higher margin business. The trading across the blue collar unit was positive. The white collar unit delivered stable
revenues in what remained a sluggish operating environment.
IFRS 10: Consolidated Financial Statements, was issued in August 2012 and replaces the guidance on control and consolidation in IAS
27: Consolidated and Separate Financial Statements, and SIC 12: Consolidation – Special Purpose Entities. The Group concluded a
BBBEE transaction in January 2005 whereby Bathusi was deconsolidated and thereafter accounted for as an associate company, in
which the Group held 45% of the equity with the balance held by a number of BBBEE shareholders. The Group has determined that while
it did not have control over the Company in terms of the principles of IAS 27, it does have control over the entity in terms of IFRS 10
given that the Group is able to control the activities of the Company and to earn variable returns. Consequently, Bathusi has been
consolidated in the financial results of the Group.
As required by IFRS 10, this change has been applied retrospectively and the comparative periods have been adjusted accordingly.
No interim dividend is proposed for the period under review. The Group will consider the resumption of dividend payments at the close
of its next reporting period.
Ongoing focus on new sales and other growth and value enhancing opportunities should improve the Group’s trading performance.
Any forward-looking statements contained herein have not been reviewed nor reported on by the Company’s auditors.
On behalf of the Board
Independent Non-Executive Chairman
15 November 2013
Chief Executive Officer
(“Primeserv” or “the Group” or “the Company”)
Incorporated in the Republic of South Africa
Registration number: 1997/013448/06 • Share code: PMV • ISIN: ZAE000039277
www.primeserv.co.za • e-mail: email@example.com
Directors: JM Judin# (Chairman), M Abel (Chief Executive Officer), Prof S Klein# (American), LM Maisela*,
DL Rose#, R Sack (Financial Director), DC Seaton, CS Shiceka#
Company secretary: ER Goodman Secretarial Services cc (represented by E Goodman)
Registered address: Venture House, Peter Place Park, 54 Peter Place, Bryanston, 2021
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001
(PO Box 3008, Saxonwold, 2132)
The amendments to the Labour Relations Act in regard to Temporary Employment Service providers have been passed by the National
Council of Provinces. It is therefore anticipated that the amendments will become law in 2014. Aside from an increased administrative
burden, the amendments are not expected to have a material impact on the Group’s HR business. Direct employment is increasingly
pressured due to ongoing weak economic conditions, resulting in a lack of new job opportunities, excessive wage demands and industrial
action. These factors tend to favour the flexible labour solutions and integrated HR services offered by established and compliant providers
such as Primeserv.
Human Capital Development
Revenue from continuing operations improved by 9% from R14,2 million to R15,4 million. The overall revenue values are not directly
comparable due to the results of the discontinued Colleges operation being included for the full 6 months in the prior reporting period
compared with a single month in the current review period. The Group disposed of its investment in the Colleges business with effect from
1 May 2013 thereby mitigating the losses and future operational risk from this unit. Operating profit from continuing operations has
decreased by 26% from R2,2 million to R1,6 million due to project revenues being deferred while certain costs have already been
expensed. This division continues to provide both strategic and profit-generating benefits to the Group.
Auditors: Baker Tilly SVG, Third Floor, 3 Melrose Boulevard, Melrose Arch, 2076
(PO Box 61051, Marshalltown, 2107)
(PO Box 355, Melrose Arch, 2076)
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd, The Woodlands, Woodlands Drive, Woodmead, 2196
(Private Bag X6, Gallo Manor, 2052)